Byline: Laura Klepacki

NEW YORK — Joining the likes of Sears, Shoppers Drug Mart and Target, CVS has given birth to a color cosmetics collection.
In select stores along the Eastern seaboard, including units in Manhattan and Northern New Jersey, the Rhode Island-based drug chain began testing Essence of Beauty cosmetics this week. While private label bath and body collections are ubiquitous among discounters and drug retailers, CVS is the first major U.S. drugstore retailer to take on cosmetics, a notoriously complicated category.
CVS spokesman Todd Andrews characterized the program as “a test.”
Although the chain declined to speculate, an industry source calculated that CVS could expect retail sales as high as $10 million, based on the number of doors in the chain and the price points and number of items in the line.
In a recently opened CVS store in Passaic, N.J., Essence of Beauty products were prominently presented on an endcap at the beginning of the cosmetics department. For now, the new beauty items are merchandised in white plastic countertop displays, although industry sources said the company has been developing a new fixture system for its cosmetics department that could eventually house the products.
In this new CVS store, aqua gift bags stuffed with blue tissue paper decorated the shelves, and throughout the department CVS alerted shoppers to a 100 percent money-back guarantee on its cosmetics.
The Essence of Beauty cosmetics on offer include lip color, lipliner pencils, lip gloss and lip balm, liquid eyeliner and eye pencils, and nail polish. Prices range from $2.99 for lip balm to $5.99 for a lipstick. Nail polish is $3.49 a bottle. Packaging is matte silver with the Essence of Beauty logo — EB in black.
As is evident from the debut of EB cosmetics, CVS is taking a keen interest in building its beauty business. The color items are an extension of its Essence of Beauty bath and body line introduced earlier this year. And CVS executives also have been talking to vendors about the creation of a new teen department called Girl Lab.
Referring to the future of its new cosmetics, CVS’s Andrews said, “We are going to see how this goes. There may be other products in the offing.” He noted that the cosmetics tested well in consumer focus groups. Speaking of its 75-stockkeeping-unit bath collection introduced in April, he said, “It is doing very well and meeting all our expectations.” Drugstore chains have been struggling to maintain cosmetics sales over the past few years, as discounters have siphoned business with expanded departments and distinct product programs. Last year, Target launched Sonia Kashuk Professional Makeup, and Wal-Mart currently has an exclusive agreement with Coty Inc. to carry Rimmel cosmetics in the U.S.
Retailers have long been attracted to private label programs because of the higher margins they bring, and they traditionally have kept initiatives in easy to merchandise, commodity-type categories. But in recent years, retailers have frequently been looking at private label as a way to create an image and differentiate its stores from the competition.
Still, cosmetics had remained off limits. There has been a mystique surrounding cosmetics marketing, with branded manufacturers supported by multimillion-dollar media budgets dominating the market.
“Back to the earliest days of national merchandising of cosmetics in the Fifties and Sixties, TV could really draw consumers and build a franchise for manufacturers, which carried into the store,” said Brian Sharoff, president of the Private Label Manufacturers Association. “But TV just can’t do it anymore. There is a proliferation of channels, and the segmentation of the market is such that it is impossible to find the right group of people for products. And that was one of the major ways that national cosmetics brands build themselves.”
For drugstores in particular, said Sharoff, a strong reason to get into cosmetics now is profitability. “There is no doubt that everyone associated with cosmetics knows exactly how immensely profitable it is. And the drugstore chains are very concerned about bottom-line profitability and survival.”
Because of the losses in pharmacy sales due to the emergence of managed care programs, “there are no sacred cows,” said Sharoff. “Cosmetics is fair game. They will go anywhere they can to build categories they can profit on.”
Another factor that can make private label cosmetics viable now for drug chains is the consolidation of the industry that has resulted in companies possessing several thousand stores. “The three or four major drug chains have immense market power,” remarked Sharoff.
Vickie Williams, president of Signature Sales and Marketing, a Canadian-based consulting firm, worked with Shoppers Drug Mart of Toronto when it developed its private label Quo cosmetics line last year. But she advises that private label collections are not for everyone.
“Unless you are absolutely committed to the line at the top levels of the company, then you probably should not do it. It takes a major commitment,” said Williams. “Cosmetics has to be part of the overall marketing strategy.”
Generally though, she thinks the move is a good idea. “Not just because it can bring retailers more cosmetics sales at higher margins, but because all retailer cosmetics departments tend to look the same,” commented Williams. “If you close your eyes, you could be in any of the four or five major chains.”
Williams, who is currently working with another U.S. drugstore retailer on development of a line, was dubious about CVS’s decision to test its line, rather than go with a full rollout.
“It is a hard thing to test. Either you do it, or don’t do it. It takes a lot of dedication to support the brand,” said Williams who spent several years with People’s Drug and Shoppers Drug Mart in Canada before branching out on her own.
But, she acknowledged, “It is still a concept that many mass retailers are nervous about. It is sku-intensive, there is a lot of inventory, and there is too much brand loyalty in cosmetics.” Retailers, she added, “are also concerned about fixturing costs and advertising.”
Yet, Sharoff said he wouldn’t be surprised to see other drugstore chains follow suit. “Any time one retailer does something profitably, every other retailer that wants to compete in that category wants to do the same.”
Mary Futher, marketing manager for Quo, remarked earlier this year that launching Quo has given Shoppers Drug Mart the eye of a retailer with the insight of a manufacturer — and that there are benefits to seeing both sides of the business.
“It gives us a competitive advantage,” said Futher. “We have a competitive advantage in knowing what we need in our own backyard. We are manufacturer and client at the same time — I can tell what is selling at any given day, whereas as a manufacturer, you may have to wait 30 days for that information. And the point-of-sale data doesn’t lie.”
But she added that having insider’s knowledge hasn’t made creating a collection from scratch any easier. “Everything is much more difficult than you think. Color is so seasonal. You always have to wonder, ‘Is that going to be a hot color or a bomb?”‘
Meanwhile, CVS is one of several U.S. chains with plans to test a universal cosmetics fixture in its stores. Leading the way are Wal-Mart and Target, which already have a handful of stores fitted with new wall units. If the move catches on and retailers take more control over cosmetics merchandising, it is expected that additional private label collections will follow. The uniform looks are said to provide an even playing field for the presentation of products and could give moderately priced store collections an advantage over high-end brands.
Some new retailer programs are also expected to include more interactive features such as in-store Internet connections.
Larry Zigerelli, executive vice president of corporate development at CVS, has said the chain would be interested in offering access to its e-commerce site. In the event a product was out of stock, a consumer could still purchase it immediately from CVS for delivery.
At a beauty conference sponsored by WWD in January, Zigerelli commented that cosmetics is the most labor intensive area of the store. “We have to make it more fun. We have to have more differentiation.” But at the same time, “We have to keep it simple.

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